New York Times

Justices Raise Bar for Suing Foreign Companies

By ADAM LIPTAK JAN. 14, 2014

WASHINGTON — The Supreme Court on Tuesday made it harder to sue foreign
companies in American courts, prompting a justice in a concurrence to accuse
the majority of creating “a new rule of constitutional law that is unmoored from
decades of precedent.”

In a second decision, the justices unanimously ruled that an antitrust case
brought by Mississippi’s attorney general could not be moved from state court to
federal court.

The first case, Daimler AG v. Bauman, No. 11-965, arose from abuses
committed during Argentina’s so-called Dirty War, which occurred from 1976 to
1983. Twenty-two residents of Argentina, contending that Daimler’s Argentine
subsidiary had collaborated with state security services in killings, torture and
other abuses, sued Daimler in California. The suit was proper there, the
plaintiffs said, in light of business conducted in the state by an American
subsidiary of Daimler that was incorporated in Delaware.

The Supreme Court unanimously rejected the contention, though for sharply
different reasons.

Justice Ruth Bader Ginsburg, writing for eight justices, said the link
between what happened in Argentina and Daimler’s connections to California
was too slender. Even assuming the American subsidiary could be sued in
California for all purposes and its contacts with the state could be imputed to its
corporate parent, Justice Ginsburg wrote, “there would still be no basis to
subject Daimler to general jurisdiction in California, for Daimler’s slim contacts
with the state hardly render it at home there.”

“Exercises of personal jurisdiction so exorbitant, we hold, are barred by due
process constraints,” she wrote.

The decision is the latest in a series of cases cutting back on the ability of
American courts to hear cases asserting corporate complicity in human rights
abuses abroad. In April, in Kiobel v. Royal Dutch Petroleum Company, the court
limited the sweep of a 1789 law that had been used to address such abuses.

Justice Ginsburg wrote that Tuesday’s decision was informed by
attentiveness to “risks to international comity” and “considerations of
international rapport,” suggesting that it would be preferable to bring such suits
where the conduct occurred or where the plaintiffs or defendants are primarily
based.

In a concurrence, Justice Sonia Sotomayor said the majority’s analysis was
“wholly foreign to our due process analysis.”

“In recent years, Americans have grown accustomed to the concept of
multinational corporations that are supposedly ‘too big to fail’; today the court
deems Daimler ‘too big for general jurisdiction,’ ” she wrote.

Still, she said that the result reached by the court was correct and that
allowing the suit “would be unreasonable given that the case involves foreign
plaintiffs suing a foreign defendant based on foreign conduct, and given that a
more appropriate forum is available.”

Justice Ginsburg responded that this approach lacked a governing principle
and that Justice Sotomayor “favors a resolution fit for this day and case only.”
Justice Sotomayor wrote that the majority’s approach, which took account
of the proportion of the American subsidiary’s sales in California, was novel,
wrong and counterproductive.

“The majority announces the new rule,” she wrote, “that in order for a
foreign defendant to be subject to general jurisdiction, it must not only possess
continuous and systematic contacts with a forum state, but those contacts must
also surpass some unspecified level when viewed in comparison to the company’s
‘nationwide and worldwide’ activities.”

Justice Sotomayor said this would “produce deep injustice” in four ways. It
will, she said, cut back on the ability of states to adjudicate disputes involving
companies that do substantial business within their borders. It will put small,
local businesses at a disadvantage. It will treat individuals and companies
differently. And it will, she concluded, “shift the risk of loss from multinational
corporations to the individuals harmed by their actions.”

In Tuesday’s second decision, Mississippi v. AU Optronics Corporation, No.
12-1036, Justice Sotomayor wrote the court’s unanimous decision. The case
concerned a 2005 law, the Class Action Fairness Act, that allows some big suits
involving many plaintiffs to be moved out of state courts thought to be hostile to
corporate defendants.

Under the law, “mass actions” involving the claims of 100 or more people,
may be transferred to federal court in some circumstances.

The question for the justices was whether an antitrust suit brought by
Mississippi against a manufacturer of liquid-crystal displays qualified as a “mass
action” because it sought, among other things, restitution for the state’s citizens.
Justice Sotomayor wrote that the suit did not qualify because the state was
the only named plaintiff. Trying to determine whose interests it represents, she
wrote, would require “unwieldy inquiries” and create “an administrative
nightmare that Congress could not possibly have intended.”

A version of this article appears in print on January 15, 2014, on page B3 of the New York edition with the
headline: Justices Raise Bar for Suing Foreign Companies.